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Areas of Finance Partnership:

1. Financial Management/Corporate Finance Advantages


2. Capital Markets - Easily and inexpensively established
3. Investments - Avoids corporate income tax
- Easier to apply for bank loans
Financial Management/Corporate Finance focuses on Disadvantages
decisions relating to how much and what types of assets - Unlimited liability of the partners
to acquire, how to raise the capital needed to purchase - Limited life of business based on partners life
assets, and how to run the firm so as to maximize its - Lower capital than a corporation
value.
Corporation:
Capital Markets markets where interest rates, along Advantages
with stock and bond prices, are determined. Also, - Huge amount of capital
Financial institutions that supply capital business. - Limited liability of the shareholders
Included are banks, investment banks, stockbrokers, - Unlimited life
mutual funds, insurance companies. Even Federal - Easy transfer of shares of stocks
Reserve system(Banko Sentral ng Pilipinas) and Disadvantages
Securities and Exchange commission. - High tax rate also double taxation
- Subject to great number of government
Investments- decisions about stocks and bonds regulations
A. security analysis finding the proper value of - Complex process in order to form one
each individual security
B. Portfolio theory deals with the best way to C Corporations large corporations which sell their
structure portfolios of stocks and bonds stock at a public trading market
C. Market Analysis- issuance of whether stock and
bond markets at any given time are too high, too S Corporations small corporations or certain
low, or about right. qualifications are taxed as if they were a proprietorship
or a partnership.
Forms of Business Organization
1. Proprietorship unincorporated business owned by Limited Liability Company A relatively new type of
one individual. organization that is hybrid between a partnership anda
2. Partnership an unincorporated business owned by corporation. Taxed as a partnership.
two or more persons.
3. Corporation a legal entity created by a state, Limited Liability Partnerships used in professional
separate and distinct from its owners and managers, firms in field of accountancy, law and the likes. Limitied
having unlimited life, easy transferability of ownership, liability of 1 or more partner but there is a need for 1 or
and limited liability. more general partner. Taxed as a partnership.

Advantages and Disadvantages Shareholder Wealth Maximization the primary goal


for managers of publicly listed companies implies that
Proprietorship: decisions should be made to maximize the long-run
Advantages value of the firms common stock. Note that managers
- Easily and inexpensively formed still have to behave ethically and must follow rules and
- Subject to few government regulations regulations.
- Subject to lower income taxes than corporations
Disadvantages Finance Departments principal task is to evaluate
- Unlimited liability of the proprietor proposed decisions and judge how they will affect the
- Limited life of business based on owners life stock price and thus shareholder wealth.
- No way of getting large sum of capitals